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For
at least the last 20 years, businesses have improved
operational performance through a series of initiatives
including Lean, TOC, Six Sigma and Total Quality Management.
Productivity improved, defects declined and inventory levels
lowered. Manufacturers in almost every industry have gone
through this, none more so than the automotive
industry.
Incongruously, Ford recently stated they have
over 80 days of inventory and Daimler-Chrysler announced their
Chrysler division was going to lose $1.15 billion this
quarter. What’s the deal? While many automotive
manufacturers are profitable there are rumblings. Getting lean
wasn’t enough. Competitiveness in the twenty-first century
requires more: deeper cost cuts, faster response times and
better customer focus.
In our opinion the answer is
simple: stop building to forecast and build to order. Building
to order can dramatically reduce costs. How to do this isn’t
so simple although anyone can build to order. Doing it quickly
enough to satisfy the customer is another thing. Customers
will be satisfied when you can build them what they want, when
they want it, at a price they are willing to pay. Several of
the automotive manufacturers are involved in a project to find
out how to do this in the context of rapid build-to-order. The
Three Day Car Programme is named after the goal of responding
to a customer with a build-to-order car in two weeks or less.
Custom built automobiles currently can take 6 months -- though
the average is 12 weeks. Interestingly the manufacturing cycle
time for a standard automobile is over 40 days even though
there’s less than 7 days of value added time in an
automobile, including delivery time.
Granted, a
successful build-to-order strategy will not overcome bad
design, unpopular features,poor quality or operating legacies
such as batch production. The biggest challenge in our opinion
is how supply chains are managed.
Supplier development
and partnering initiatives will be important as a means to
overcome the challenges to the automotive industry’s
successful implementation of build-to-order business
models.
We predict every industry will be similarly
challenged.
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